Newsletter. Tax Planning 2014 Edition

Transcription

1 Newsletter Tax Planning 2014 Edition FEATURED IN THIS ISSUE Employee Superannuation Payments Concessional Contributions Cap Non-Concessional Contributions Cap Small Business Concessions Reversed Write -off Bad Debts Deferring until after 30 June Deferring Capital Gains Fast-track your Deductions Claiming deductions for expenses not paid at the year end Investment Property Depreciation Motor Vehicle Log Book Stock on hand Private Company Loans ( Division 7A Loans to shareholders) Market Valuations for Self-Managed Superannuation Fund (SMSF) Assets Discretionary Family Trusts Unpaid Present Entitlements (UPEs) Conclusion 1

2 SPECIAL 2014 TAX PLANNING BULLETIN As the end of the 2013/2014 financial year is fast approaching, now is the time for business owners, large and small, to consider the tax planning strategies available. This bulletin is intended to highlight these strategies which, if taken advantage of before 30 June, can assist in maximising your financial and taxation position. For those clients with a trust structure in place, an important area to note is that of Trust distribution minutes and the actions required before 30 June As in prior years, we will be communicating with clients to address these matters in the coming weeks. Employee Superannuation Payments For businesses to obtain a tax deduction in this financial year for the compulsory 9.25% employee superannuation contributions owing for the June 2014 quarter, they must be paid and cleared by end of business 30 June 2014, rather than the statutory due date of 28 July Concessional contributions cap The general concessional (before-tax) contributions cap for is $25,000 for persons aged under 60 at 30 June 2014 and $35,000 for persons aged 60 to 75. This cap applies to the total of employer contributions, contributions made under a salary sacrifice arrangement and tax-deductible contributions made by an individual. Being aware of the contributions caps is very important as any excess contributions above the cap are subject to an additional 31.5% tax, in addition to the usual 15% contributions tax. Non Concessional contributions cap Non-concessional contributions include personal contributions for which you do not claim an income tax deduction. If you re under 65, you can contribute up to three times the $150,000 in non-concessional (after-tax) contributions without getting hit by penalty excess contributions tax. You can do this by bringing forward up to two years worth of contributions which is called a bringforward. If you re aged between 65 and 74, you must satisfy a work test before making contributions and you cannot take advantage of the bring forward rules. Once you reach the age of 75, you can no longer make super contributions, although your employer can continue to make Superannuation Guarantee contributions. The non-concessional contributions cap is set to increase from $150,000 to $180,000 for the 2014/15 year. 2

3 Small Business Concessions Reversed One of the Coalition government s key election promises was to repeal the 'mining tax' (i.e. Mineral Resource Rent Tax (MRRT) as well as the carbon tax) and the tax measures associated with mining tax. The measures in question primarily benefited small businesses and include the loss carry-back measures and the increased concessions for depreciation of certain assets. The House of Representatives has passed legislation to repeal the MRRT and related measures however the Bills were defeated in the Senate. Once the new Senate is formed on 1 July 2014 the reintroduction and passage of the legislation is more likely. Its approval will mean the immediate deduction for assets purchased after 1 January 2014, will reduce from $6,500 to only $1,000 and the upfront $5,000 deduction for motor vehicles purchased after 1 January 2014 will no longer be available. Write-off Bad Debts Businesses should review their Trade Debtors listing and consider whether any bad debts have been incurred. A deduction for a bad debt can be claimed in 2013/14 as long as the debt is declared bad before 30 June The business will need to show that it has made a genuine attempt to recover the debt and retain proof that the debt is bad. Ideally this decision should be made in writing. Tip: Remember to also claim back the GST if you are registered. Deferring income until after 30 June Where your cash flow position allows, consider deferring income, especially if you expect lower income for 2014/15 compared to 2013/14. Defer issuing further invoices and/or receiving cash/debtor payments until after 30 June Deferring Capital Gains It is important to note that the Contract Date is generally the key date used for determining a capital gains tax event and not the Settlement Date. If you are considering selling shares or property you may wish to delay signing the contract until the new financial year. Realising a capital gain after 30 June 2014 will defer tax on the gain by 12 months. This can also be an effective strategy to access the 50% general discount which requires the asset to be held for at least 12 months. (Not available for companies). Consider realising capital losses if you have already realised capital gains on other assets for the year ending 30 June

4 Fast-track your Deductions Small businesses can make prepayments (up to 12 months) on expenses before 30 June 2014 and obtain a full tax deduction in the 2013/2014 financial year. These may include: Prepayment of interest on a deductible loan Maintenance and repairs Membership subscriptions in relation to trade or professional bodies Rent on business premises or equipment Lease payments on office equipment Cost of Business trips even if taken after 1 July 2014 Cost of Training courses that will transpire after 1 July 2014 Claiming deductions for expenses not paid at year end Both SBE (Small Business Entities) and non-sbe taxpayers are entitled to an immediate deduction for certain expenses that have been incurred but not paid by 30 June including: Salary and Wages a tax deduction can be claimed for the number of days that employees have worked up to 30 June 2014, but have not been paid until the new financial year. Staff Bonuses and Commissions a business can claim a tax deduction for staff bonuses and commissions that are owed and unpaid at 30 June 2014 where it is definitely committed to the expense. Investment Property Depreciation If you have purchased an investment property we recommend you arrange for the preparation of a Property Depreciation Report to allow you to maximise the depreciation and building write-off deductions available. Quantity Surveyors are recognised by the ATO as appropriately qualified professionals for the purpose of preparing Property Depreciation Reports as they have expertise in the valuation of construction costs. In the instance that the original building cost is not available, or renovations and improvements have been made to the property, a Quantity Surveyor will be able to prepare an estimate of the construction cost. Motor Vehicle Log Book Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period starting on or before 30 June Your log book is then valid for five years. It s beneficial to record usage during your busy periods and not, for example, over a holiday period. 4

5 Stock on hand Where applicable to your business you should conduct a detailed physical stock take of all stock on 30 th June Review the listing and write-off any obsolete or worthless stock items. Private Company Loans ( Division 7A Loans to shareholders) Business owners under a company structure who have borrowed funds from their company must ensure the appropriate principal and interest repayments are made by 30 June These amounts can be determined from the Loan Agreements previously provided to you. The ATO is currently focusing their risk review and audit activity on loans to shareholders. Market Valuations for Self-Managed Superannuation Fund (SMSF) Assets While it has been common practice at our firm to value all assets within SMSFs at market value, it became mandatory on 1 July For shares in listed companies and many managed investments, their value is easily attainable either from the ASX share listing or a yearly valuation statement. Other investments, such as property and unlisted shares, can be more difficult. It is incumbent on trustees to carefully consider the asset, its condition, potential market, and general economic conditions to determine a clue themselves. Consider obtaining independent third party valuations that take all of the relevant facts into account. Discretionary Family Trusts As mentioned at the beginning of our bulletin Trusts are now required to sign resolutions/minutes declaring the split of its profit to beneficiaries before 30 June. This can be simple for some family trusts, but more complex for detailed business structures. An interim review is generally required in order to accurately forecast and allocate business profits and help minimise tax. If the resolution is not completed by 30 June 2014, the ATO has the ability to tax the income of the trust at the top marginal rate (46.5%). Unpaid Present Entitlements (UPEs) Unpaid Present Entitlements made after 16 December 2009 by a trust to a company will be treated as a loan by the company to the trust. The documentation and legislative requirements for Unpaid Present Entitlements are very strict. Tax planning provides an opportunity to review these issues prior to year end and also plan for dividends that you may need to declare to meet the minimum repayments. 5

6 Conclusion 30 June is only 6 weeks away. It s not a long time at all. This year let s try and use all of this time to effectively minimise your tax, review the performance of your business and create greater wealth for you and your family. Although tax laws are complex and constantly changing, there are always opportunities to minimise your tax liability but time is of the essence. To discuss your individual/business circumstances or concerns, please contact us: Greg Walsh E greg@gjwalsh.com.au David Richardson E david@gjwalsh.com.au T (07) Brisbane Street, Ipswich Disclaimer: This publication is issued exclusively for the clients of G J Walsh & Co. The information in this document is of a general nature and does not take into account your individual needs and objectives. The contents are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the presentation of the publication, no responsibility is accepted for persons acting on this information. Liability limited by a scheme approved under Professional Standards Legislation. G J Walsh & Co April